Shortcut Trick
Profit is distributed in the ratio of (Capital × Time).
Alok's total capital = (90,000 × 6) + (1,20,000 × 6) = 12,60,000
Deepak's time in business = 12 − 3 (joined late) − 3 (left early) = 6 months.
Deepak's total capital = 1,20,000 × 6 = 7,20,000
Ratio = 12,60,000 : 7,20,000 = 7 : 4
∴ The correct answer is 7:4.
Alternate Method
0m 3m 6m 9m 12m Alok 90k × 6m 120k × 6m Deepak 120k × 6m
Given:
Alok's initial investment = ₹90,000
Alok's increased investment after 6 months = ₹90,000 + ₹30,000 = ₹1,20,000
Deepak's investment = ₹1,20,000
Total time for business = 12 months
Formula Used:
Profit Ratio = (C1 × T1) : (C2 × T2)
Calculations:
⇒ Alok invested ₹90,000 for the first 6 months.
⇒ Alok invested ₹1,20,000 for the remaining 6 months.
⇒ Equivalent capital for Alok = (90,000 × 6) + (1,20,000 × 6)
⇒ Equivalent capital for Alok = 5,40,000 + 7,20,000 = 12,60,000
⇒ Deepak joined after 3 months and left 3 months before the end.
⇒ Deepak's total investment time = 12 − 3 − 3 = 6 months.
⇒ Equivalent capital for Deepak = 1,20,000 × 6 = 7,20,000
⇒ Profit sharing ratio (Alok : Deepak) = 12,60,000 : 7,20,000
⇒ Alok : Deepak = 126 : 72 = 7 : 4
∴ The correct answer is 7:4.
Additional Information
Joining Mid-way
If a partner joins the business after t months, their investment is considered active for (12 − t) months in an annual profit cycle.
Compound Ratio in Partnership
The profit is always distributed in the compound ratio of individual investments and time periods: (C1 × T1) : (C2 × T2) : (C3 × T3).
Active and Sleeping Partner
An active partner is paid a fixed amount or a specific percentage of the profit for managing the operations, and the remaining profit is distributed based on their capital and time ratios.